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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBERS: 0-25638 (NYNEX CABLECOMMS GROUP PLC)
0-25690 (NYNEX CABLECOMMS GROUP INC.)
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NYNEX CABLECOMMS GROUP PLC
Incorporated under the laws of England and Wales I.R.S. Employer Identification No. 98-0151138
NYNEX CABLECOMMS GROUP INC.
Incorporated under the laws of Delaware I.R.S. Employer Identification No. 98-0151139
THE TOLWORTH TOWER, EWELL ROAD, SURBITON, SURREY KT6 7ED, UNITED KINGDOM
(44)-181-873-2000
(Telephone number)
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Number of shares outstanding of each of the classes of common stock, as of
April 30, 1997:
925,976,934 Ordinary Shares of NYNEX CableComms Group PLC, L0.10 par value
925,976,934 shares of Common Stock of NYNEX CableComms Group Inc., $.01 par
value
(Ordinary Shares and shares of Common Stock are "stapled" and trade together as
Units.)
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NYNEX CABLECOMMS GROUP PLC AND
NYNEX CABLECOMMS GROUP INC.
PART 1 -- FINANCIAL INFORMATION
COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER ADS AMOUNTS) (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31,
-------------------------------------
1997 1996 1997
--------- --------- ---------
L L $
[NOTE B]
Operating revenue:
Cable television.................................... 19,081 14,290 31,385
Telecommunications -- residential................... 21,212 14,807 34,889
Telecommunications -- business...................... 4,601 2,371 7,568
Installation........................................ 1,633 1,053 2,686
--------- --------- ---------
Total operating revenue............................... 46,527 32,521 76,528
--------- --------- ---------
Operating expenses:
Programming......................................... 11,448 7,790 18,829
Telecommunications.................................. 7,656 6,986 12,593
Depreciation and amortization....................... 16,179 12,254 26,611
Staff costs......................................... 12,243 12,928 20,138
Selling, general and administrative................. 14,451 11,783 23,769
--------- --------- ---------
Total operating expenses.............................. 61,977 51,741 101,940
--------- --------- ---------
Operating loss........................................ (15,450) (19,220) (25,412)
--------- --------- ---------
Other income (expense):
Interest income..................................... 1,161 86 1,910
Interest expense.................................... (9,787) (5,422) (16,098)
Minority interest................................... 12,223 15,203 20,104
--------- --------- ---------
Total other income (expense).......................... 3,597 9,867 5,916
--------- --------- ---------
Loss before income taxes.............................. (11,853) (9,353) (19,496)
Income taxes.......................................... -- -- --
--------- --------- ---------
Net loss.............................................. (11,853) (9,353) (19,496)
========= ========= =========
Net loss per ADS...................................... (0.128) (0.101) (0.211)
========= ========= =========
ADSs outstanding...................................... 92,598 92,549 92,598
========= ========= =========
Accumulated deficit
Beginning of period................................. (111,181) (88,336) (182,870)
Net loss............................................ (11,853) (9,353) (19,496)
--------- --------- ---------
End of period....................................... (123,034) (97,689) (202,366)
========= ========= =========
See accompanying notes to the combined financial statements.
1
NYNEX CABLECOMMS GROUP PLC AND
NYNEX CABLECOMMS GROUP INC.
COMBINED BALANCE SHEETS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
MARCH 31, DECEMBER 31, MARCH 31,
1997 1996 1997
--------- ------------ ---------
L L $
[NOTE B]
ASSETS
Current assets:
Cash and temporary cash investments............... 7,072 15,430 11,632
Receivables net of allowance of L5,334 and L3,536
at March 31, 1997 and December 31, 1996,
respectively................................... 42,748 53,041 70,312
Prepaid expenses.................................. 2,979 3,273 4,900
--------- --------- ---------
Total current assets................................ 52,799 71,744 86,844
Property, plant and equipment, net of accumulated
depreciation of L130,851 and L74,693 at March 31,
1997 and December 31, 1996, respectively.......... 1,142,426 1,098,119 1,879,062
Goodwill, net of accumulated amortization of L3,026
and L2,848 at March 31, 1997 and December 31,
1996, respectively................................ 25,316 25,493 41,639
Deferred finance costs, net......................... 51,129 52,148 84,097
Other assets........................................ 1,648 1,383 2,711
--------- --------- ---------
Total Assets........................................ 1,273,318 1,248,887 2,094,353
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................. 61,579 62,990 101,285
Other current liabilities......................... 56,546 51,715 93,007
--------- --------- ---------
Total current liabilities........................... 118,125 114,705 194,292
Long-term debt [Note D]............................. 492,649 447,649 810,309
Other long-term liabilities......................... 8,127 8,670 13,367
Minority interest [Note E].......................... 64,354 76,577 105,849
--------- --------- ---------
Total liabilities................................... 683,255 647,601 1,123,817
--------- --------- ---------
Commitments and contingencies [Note G]
STOCKHOLDERS' EQUITY
Ordinary shares -- par value L0.10 per share (1,500
million authorized, 926 million issued and
outstanding)...................................... 92,598 92,549 152,305
Shares of common stock -- par value $0.01 per share
(1,500 million authorized, 926 million issued and
outstanding)...................................... 5,769 5,766 9,489
Additional paid-in capital.......................... 614,730 614,152 1,011,108
Accumulated deficit................................. (123,034) (111,181) (202,366)
--------- --------- ---------
Total stockholders' equity.......................... 590,063 601,286 970,536
--------- --------- ---------
Total liabilities and stockholders' equity.......... 1,273,318 1,248,887 2,094,353
========= ========= =========
See accompanying notes to the combined financial statements.
2
NYNEX CABLECOMMS GROUP PLC AND
NYNEX CABLECOMMS GROUP INC.
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS) (UNAUDITED)
FOR THE THREE MONTHS ENDED
MARCH 31,
------------------------------
1997 1996 1997
------ ------- --------
L L $
[NOTE B]
Cash Flows From Operating Activities:
Net loss.................................................... (11,853) (9,353) (19,496)
------- ------- --------
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization............................ 16,179 12,254 26,611
Amortization of deferred finance costs................... 1,625 1,625 2,673
Provision for bad debts.................................. (2,727) 1,257 (4,485)
Minority interest........................................ (12,223) (15,203) (20,104)
Gain on sale of capital assets........................... (179) -- (294)
Changes in operating assets and liabilities:
Receivables............................................ 7,564 8,470 12,442
Prepaid expenses....................................... 293 206 481
Accounts payable....................................... 2,887 394 4,749
Other current liabilities.............................. 5,783 (3,443) 9,511
------- ------- --------
Total adjustments............................................. 24,656 5,560 40,554
------- ------- --------
Net cash provided by/(used in) operating activities........... 12,803 (3,793) 21,058
------- ------- --------
Cash Flows From Investing Activities:
Capital expenditures........................................ (65,233) (88,356) (107,295)
Sale of capital assets...................................... 810 -- 1,332
Other investing activities.................................. (269) -- (442)
------- ------- --------
Net cash used in investing activities......................... (64,692) (88,356) (106,405)
------- ------- --------
Cash Flows From Financing Activities:
Proceeds from borrowings.................................... 45,000 90,030 74,016
Payments made on capital leases............................. (320) -- (526)
Change in other long-term liabilities....................... (1,149) -- (1,890)
------- ------- --------
Net cash provided by financing activities..................... 43,531 90,030 71,600
------- ------- --------
Net decrease in cash and temporary cash investments........... (8,358) (2,119) (13,747)
Cash and temporary cash investments at beginning of period.... 15,430 9,807 25,379
------- ------- --------
Cash and temporary cash investments at end of period.......... 7,072 7,688 11,632
======= ======= ========
See accompanying notes to the combined financial statements.
3
NYNEX CABLECOMMS GROUP PLC AND
NYNEX CABLECOMMS GROUP INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
A ORGANIZATION OF NYNEX CABLECOMMS
In February 1995, two indirect wholly owned subsidiaries of NYNEX
Corporation ("NYNEX") were incorporated: NYNEX CableComms Group PLC ("NYNEX
CableComms UK"), a public limited company incorporated under the laws of England
and Wales, and NYNEX CableComms Group Inc. ("NYNEX CableComms US"), a Delaware
corporation (together "the Companies"). The ordinary shares of NYNEX CableComms
UK "NYNEX CableComms UK Ordinary Shares" and the common stock of NYNEX
CableComms US ("NYNEX CableComms US Shares of Common Stock") may not be traded
separately and may only be traded together as Units in the form of ADSs on the
Nasdaq National Market and as Units on the London Stock Exchange. NYNEX
CableComms UK and NYNEX CableComms US hold 90% and 10%, respectively, of the
shares in NYNEX NYNEX CableComms UK Holdings, Inc. ("UK Holdings") which holds
the majority ownership interests in the companies which hold the cable
television and telecommunications licenses for the 16 franchise areas in England
of NYNEX CableComms ("the Operating Companies").
NYNEX CableComms UK and NYNEX CableComms US collectively, and the
subsidiaries and partnerships in which they have the entire or a majority
ownership interest, are hereinafter referred to as "NYNEX CableComms".
In October 1996, Cable and Wireless plc, Bell Canada International Inc. and
NYNEX entered into an agreement (as amended and restated, the "Transaction
Agreement") pursuant to which, subject to the satisfaction of certain conditions
precedent, the parties agreed to combine Mercury Communications Limited, Bell
Cablemedia plc (as enlarged by the acquisition of Videotron Holdings plc) and
NYNEX CableComms under a new holding company, Cable & Wireless Communications
plc ("CWC"). On April 28, 1997, CWC announced that it had acquired 92.6% of the
outstanding NYNEX CableComms UK Ordinary Shares and NYNEX CableComs US Shares of
Common Stock (including shares represented by NYNEX CableComms ADSs) in exchange
for CWC ordinary shares. The remaining shares will be acquired through a
compulsory acquisition procedure in the UK and a "squeeze-out" merger in the US.
See Note H below. As a result of the consummation of the transactions
contemplated by the Transaction Agreement, among other things, NYNEX CableComms
has become a part of the combined CWC group, its existing credit facilities
described in Note D below have been repaid and replaced with a CWC credit
facility and the minority interest described in Note E below has been eliminated
as a result of CWC's acquisition thereof.
B BASIS OF PRESENTATION
The unaudited combined financial statements have been prepared by NYNEX
CableComms UK and NYNEX CableComms US pursuant to the rules and regulations of
the Securities and Exchange Commission (the "SEC") and, in the opinion of
management, include all adjustments necessary for a fair presentation of the
financial information for each period shown in accordance with accounting
principles generally accepted in the United States ("US GAAP"). Certain
information and footnote disclosures normally included in combined financial
statements prepared in accordance with US GAAP have been condensed or omitted
pursuant to such SEC rules and regulations. Management believes that the
disclosures made are adequate to make the information presented not misleading.
The results for interim periods are not necessarily indicative of the results
for the full year.
The unaudited combined financial statements should be read in conjunction
with the audited combined financial statements and the notes thereto included in
the Companies' Annual Report on Form 10-K for the year ended December 31, 1996.
4
NYNEX CABLECOMMS GROUP PLC AND
NYNEX CABLECOMMS GROUP INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(UNAUDITED) -- (CONTINUED)
The unaudited combined financial statements are presented in pounds
sterling ("L"). Solely for the convenience of the reader, the unaudited combined
financial statements as at and for the period ended March 31, 1997 have been
presented in US dollars ("$") at the rate of L1.00 = $1.6448, the Noon Buying
Rate of the Federal Reserve Bank of New York on March 31, 1997. The presentation
of the US dollar amounts should not be construed as US GAAP, or as a
representation that the pounds sterling amounts shown could be so converted into
US dollars at the rate indicated or at any other rate.
Certain defined terms used herein are defined in the Companies' Annual
Report on Form 10-K for the year ended December 31, 1996.
C PRINCIPLES OF COMBINATION
All significant intercompany accounts and transactions have been eliminated
in combination. Certain costs incurred by NYNEX have been charged to NYNEX
CableComms on a direct basis. Such costs are not substantially different than
those which NYNEX CableComms would have incurred on a stand-alone basis.
D FINANCING OF NYNEX CABLECOMMS
At March 31, 1997, NYNEX CableComms was party to two broadly similar
financing arrangements, one for the northern Operating Companies (the "Northern
Operating Companies") and one for the southern Operating Companies (the
"Southern Operating Companies").
Under the arrangements, two entities related to NYNEX (the "North limited
partner" and the "South limited partner") provided credit facilities to the
Operating Companies and invest capital, through limited partnership interests,
in partnerships controlled by NYNEX CableComms. Deferred finance costs of L42.0
million for the Northern arrangement and L23.0 million for the Southern
arrangement were incurred in December 1994 and December 1993, respectively. See
Note H below for subsequent events.
Credit Facilities
The credit facilities are for a maximum of L542.5 million in the case of
the Northern Operating Companies and L274.0 million in the case of the Southern
Operating Companies. An additional L157.5 million is available under the
Northern financing arrangement to expand the network into additional franchise
areas if such franchises are acquired prior to December 31, 1998.
NYNEX CableComms has entered into two forward Sterling interest rate swaps
with NYNEX to reduce potential exposure to interest rate risk on floating rate
financing arrangements.
NYNEX financing facility
NYNEX has entered into a further credit facility directly with NYNEX
CableComms to make available up to L200.0 million (the "NYNEX Facility") to be
borrowed at NYNEX CableComms' option at an interest rate of 3 month Sterling
LIBOR plus 4.0%. NYNEX CableComms may make drawings under this facility at any
time before May 31, 1997. Any amounts borrowed under the facility are to be
repaid in full by May 31, 1998. No drawings have yet been made on this facility.
E MINORITY INTEREST
The North limited partner and the South limited partner also have limited
partnership interests in partnerships (the "North Partnership" and the "South
Partnership") controlled by NYNEX CableComms. Minority interest reflects the
North and South limited partners' interest in the North and South Partnerships.
5
NYNEX CABLECOMMS GROUP PLC AND
NYNEX CABLECOMMS GROUP INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(UNAUDITED) -- (CONTINUED)
The limited partners have contributed L211.7 million as of March 31, 1997.
The Minority interest in the North Partnership and South Partnership was L5.2
million and L59.2 million at March 31, 1997, respectively.
Under the partnership agreements, NYNEX CableComms generally has an 85%
interest, and the limited partners generally have a 15% interest, in items of
income, gain, loss, deduction or credit, except in respect of the initial losses
and profits (being specified amounts of profits or losses calculated in
accordance with US tax principles) of the relevant partnership. The North and
South Partnerships generally have an 85% interest in the Northern and Southern
Operating Companies, respectively.
Initial losses up to a maximum cumulative amount of L200.0 million for the
North Partnership and L40.0 million for the South Partnership will be allocated
to the limited partners. Subsequent losses will be wholly allocated to NYNEX
CableComms until its share of the cumulative losses of the relevant partnership
is equal to 85% of such cumulative losses. Losses thereafter, if any, will be
allocated 85% to NYNEX CableComms and 15% to the limited partners. Initial
profits will be allocated between NYNEX CableComms and the limited partners in
proportion to the cumulative losses allocated to each partner until such losses
have been fully offset by profits. Thereafter, all profits are to be allocated
85% to NYNEX CableComms and 15% to the limited partners. Initial losses for the
South Partnership reached L40.0 million in the first quarter of 1996. Initial
losses for the North Partnership have not yet reached L200.0 million.
For the purposes of preparing the combined financial statements, the profit
or loss of the relevant partnership is allocated between NYNEX CableComms and
the limited partners in accordance with the profit and loss allocations set out
in the relevant partnership agreement.
F SUPPLEMENTAL CASH FLOW INFORMATION
The following information is provided in accordance with Statement of
Financial Accounting Standards No. 95, "Statement of Cash Flows":
FOR THE THREE
MONTHS
ENDED MARCH 31,
-------------------
1997 1996
------- -------
L L
(IN THOUSANDS)
Non cash items excluded from the Combined Statements of Cash Flows:
Property, plant and equipment acquired by incurring directly related
liabilities.......................................................... 62,960 59,397
====== ======
G LITIGATION AND OTHER CONTINGENCIES
Various legal actions and proceedings are pending that may affect NYNEX
CableComms. While counsel cannot give assurance as to the outcome of any of
these matters, in the opinion of the management of NYNEX CableComms, based upon
the advice of counsel, the ultimate resolution of these matters in future
periods is not expected to have a material effect on NYNEX CableComms' financial
position, operating results or cash flows.
H SUBSEQUENT EVENTS
CWC ACQUISITION
On April 28, 1997, CWC announced that all conditions had been satisfied or
waived in connection with its recommended offers (the "Offers") to purchase all
the Ordinary Shares of NYNEX CableComms UK
6
NYNEX CABLECOMMS GROUP PLC AND
NYNEX CABLECOMMS GROUP INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(UNAUDITED) -- (CONTINUED)
and all the shares of Common Stock of NYNEX CableComms US comprised in Units and
that the Initial Offer Period, as extended, and withdrawal rights, expired at
2:30 pm (London time), 9:30 am (New York City time) on April 28, 1997. Pursuant
to the Offers, CWC has accepted for purchase all Units and NYNEX CableComms ADSs
validly tendered and not withdrawn prior to the expiration of the Initial Offer
Period in exchange for 0.330714 Ordinary Shares of CWC per NYNEX CableComms UK
Ordinary Share and 0.036746 CWC Ordinary Shares per NYNEX CableComms US share of
Common Stock (equivalent to 0.36746 CWC Ordinary Shares per Unit and 3.6746 CWC
Ordinary Shares per NYNEX CableComms ADS). The Offers will remain open for a
Subsequent Offer Period which will expire at 2:30 pm (London time), 9:30 am (New
York City time) on May 12, 1997. During the Subsequent Offer Period, Units and
NYNEX CableComms ADSs for which valid acceptances are received will be accepted
for purchase by CWC.
The shares purchased by CWC upon the expiration of the Initial Offer Period
included 620,000,000 NYNEX CableComms UK Ordinary Shares and 620,000,000 NYNEX
CableComms US shares of Common Stock tendered by NYNEX through its subsidiary,
NYNEX Network Systems Company, representing approximately 67% of the outstanding
NYNEX CableComms UK Ordinary Shares and 67% of the outstanding NYNEX CableComms
US shares of Common Stock, respectively. As a result, CWC acquired control of
the Companies from NYNEX. In connection with the Offers, the four Directors
appointed by NYNEX to the Boards of Directors of each of NYNEX CableComms UK and
NYNEX CableComms US have resigned effective upon all conditions to the Offers
being satisfied or waived.
Pursuant to an Agreement and Plan of Merger, dated as of March 21, 1997
(the "Merger Agreement"), among NYNEX CableComms US, CWC and Cable & Wireless
Communications Delaware Inc. (the "Merger Sub"), CWC intends to cause Merger Sub
to merge with and into NYNEX CableComms US (the "Merger"). After the effective
time of the Merger, each share of NYNEX CableComms US Common Stock (other than
shares owned by CWC, shares owned by NYNEX CableComms US as treasury shares or
by any of its subsidiaries) will be converted into the right to receive 0.036746
CWC Ordinary Shares (or at the election of the shareholder, 0.007349 CWC
American Depositary Shares). As a result of the Merger, the separate corporate
existence of NYNEX CableComms US will cease and NYNEX CableComms US will become
a wholly-owned subsidiary of CWC. At a Special Meeting of NYNEX CableComms US
held on April 24, 1997, the shareholders of NYNEX CableComms US approved the
Merger.
Pursuant to Sections 428-430F of the Companies Act 1985 of Great Britain,
CWC has given a notice on May 6, 1997 that it will acquire compulsorily the
remaining NYNEX CableComms UK Ordinary Shares (including those represented by
NYNEX CableComms ADSs) not purchased by CWC in the Offers (the "Compulsory
Acquisition") on the same terms as in the Offers. As a result of the Compulsory
Acquisition, NYNEX CableComms UK will become a wholly-owned subsidiary of CWC
and all of the outstanding NYNEX CableComms UK Ordinary Shares, other than NYNEX
CableComms UK Ordinary Shares held by CWC, will be acquired for 0.330714 CWC
Ordinary Shares per NYNEX CableComms UK Ordinary Share (or, at the election of
the shareholder, 0.066143 CWC American Depositary Shares).
7
NYNEX CABLECOMMS GROUP PLC AND
NYNEX CABLECOMMS GROUP INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FIRST QUARTER OF 1997 AS COMPARED WITH FIRST QUARTER OF 1996
FORMATION OF CWC
In October 1996, Cable and Wireless plc, Bell Canada International Inc. and
NYNEX entered into an agreement (as amended and restated, the "Transaction
Agreement") pursuant to which, subject to the satisfaction of certain conditions
precedent, the parties agreed to combine Mercury Communications Limited, Bell
Cablemedia plc (as enlarged by the acquisition of Videotron Holdings plc) and
NYNEX CableComms under a new holding company, Cable & Wireless Communications
plc ("CWC"). On April 28, 1997, CWC announced that it had acquired 92.6% of the
outstanding NYNEX CableComms UK Ordinary Shares and NYNEX CableComms US Shares
of Common Stock (including shares represented by NYNEX CableComms ADSs) in
exchange for CWC ordinary shares. The remaining shares will be acquired through
a compulsory acquisition procedure in the UK and a "squeeze-out" merger in the
US. As a result of the consummation of the transactions contemplated by the
Transaction Agreement, among other things, NYNEX CableComms has become a part of
the combined CWC group, its existing credit facilities discussed below under
"Financing of NYNEX CableComms" have been repaid and replaced with a CWC credit
facility, and other changes may occur in relation to its income taxes, capital
resources and liquidity and in its regulatory position and future prospects. The
possibility of these future changes should be taken into account when reviewing
"Income Taxes", "Capital resources and liquidity", "Financing of NYNEX
CableComms" and "Cash flows and liquidity", below.
RESULTS OF OPERATIONS
In the first quarter of 1997, NYNEX CableComms changed its method of
calculating penetration rates using homes released to operations as the
denominator in the calculations rather than homes passed and marketed. All
references to penetration rates below are the revised rates based on the new
calculations.
REVENUE
Operating revenue increased 43% to L46.5 million for the first quarter of
1997 from L32.5 million for the first quarter of 1996. The increase is
attributable primarily to an increased customer base, marketing activity and
continuing construction of the network.
Cable television. Cable television revenue increased 34% to L19.1 million
for the first quarter of 1997 from L14.3 million for the first quarter of 1996.
This increase was primarily the result of the number of basic customers. The
number of basic customers increased 34% to 283,720 at March 31, 1997 from
211,611 at March 31, 1996. The average monthly cable television revenue per
basic customer has remained relatively stable at L23.06 for the first quarter of
1997 compared to L23.44 for the first quarter of 1996.
The number of homes released to operations in NYNEX CableComms' operating
franchises increased 24% to 1,568,934 at March 31, 1997 from 1,262,237 at March
31, 1996. Penetration rates increased to 18.1% at March 31, 1997 from 16.8% at
March 31, 1996, as a higher proportion of NYNEX CableComms' potential customers
chose to purchase cable television services. NYNEX CableComms' churn rate
decreased to 27.2% at March 31, 1997 from 30.1% at March 31, 1996 as less
customers chose to disconnect from their cable television service. The pay to
basic ratio remained relatively stable at 201.5% at March 31, 1997 compared to
202.3% at March 31, 1996.
Residential telecommunications. Residential telecommunications revenue
increased 43% to L21.2 million for the first quarter of 1997 from L14.8 million
for the first quarter of 1996. This increase was primarily the
8
result of an increase in the number of residential telecommunications lines and
increased usage. The number of residential telecommunications lines increased
40% to 376,814 at March 31, 1997 from 268,235 at March 31, 1996. The average
monthly residential telecommunications revenue per line decreased to L19.55 for
the first quarter of 1997 from L19.70 for the first quarter of 1996. The
decrease in the first quarter of 1997 was primarily attributable to price
reductions in the period.
The increase in the number of residential telecommunications lines reflects
to a large degree the increase in the number of homes released to operations for
residential telecommunications services, which increased 24% to 1,568,934 at
March 31, 1997 from 1,262,237 at March 31, 1996. Penetration rates increased to
24.0% at March 31, 1997 from 21.3% at March 31, 1996. NYNEX CableComms believes
that the increase in penetration rates is primarily attributable to its pricing
strategy and a broader acceptance of its telecommunications' service as an
alternative to that provided by British Telecommunications plc ("BT"). The
residential telecommunications churn rate decreased to 16.3% at March 31, 1997
from 17.8% at March 31, 1996.
Business telecommunications. Business telecommunications revenue increased
92% to L4.6 million for the first quarter of 1997 from L2.4 million for the
first quarter of 1996. This increase was primarily attributable to an increase
in the number of lines. The number of business telecommunications lines
increased 117% to 39,343 at March 31, 1997 from 18,166 at March 31, 1996 while
the average monthly business telecommunications revenue per line decreased to
L42.58 for the first quarter of 1997 from L48.25 for the first quarter of 1996.
The decrease in the first quarter of 1997 was primarily attributable to price
reductions in the period together with the increased number of CENTREX lines,
which tend to generate less revenue per line than single business lines. The
average number of lines per business customer increased 34% to 4.7 at March 31,
1997 from 3.5 at March 31, 1996 reflecting primarily the increased number of
CENTREX lines.
The increase in the number of business telecommunications lines resulted
from an increase in the number of businesses released to operations for business
telecommunications services, which increased to 83,340 at March 31, 1997. NYNEX
CableComms did not keep records of businesses released to operations until June
30, 1996, at this date the number was 68,020. The business telecommunications
churn rate increased slightly to 12.6% at March 31, 1997 from 12.4% at March 31,
1996.
Installation. NYNEX CableComms' combined installation revenues for cable
television and residential and business telecommunications increased 36% to L1.6
million for the first quarter of 1997 from L1.1 million for the first quarter of
1996. This growth in revenue reflects the continuing network construction and
the corresponding increase of its customer base.
Operating Expenses. Operating expenses increased 20% to L62.0 million for
the first quarter of 1997 from L51.7 million for the first quarter of 1996 as a
result of the continuing network construction and increase in the customer base.
The components of total operating expenses are programming costs,
telecommunications expenses, depreciation and amortization, staff costs and
selling, general and administrative expenses.
Total programming costs as a percentage of cable television revenue were
60% for the first quarter of 1997 compared with 54% for the first quarter of
1996. The increased costs are a result of introducing new channels over the last
twelve months and an increase in prices charged by programming suppliers.
Telecommunications expenses principally reflect interconnect charges paid
to national and international carriers for NYNEX CableComms' traffic over their
networks. Telecommunications expenses for the first quarter of 1997 decreased to
30% of telecommunications revenue from 41% in the first quarter of 1996 as a
result of successful price negotiations agreed with interconnect providers
towards the end of 1996.
Depreciation and amortization increased 32% to L16.2 million for the first
quarter of 1997 from L12.3 million for the first quarter of 1996. This increase
is primarily related to the increase in the cost of total property, plant and
equipment to L1,273.3 million at March 31, 1997 from L1,005.4 million at March
31, 1996. Depreciation will continue to rise as the network is built out.
Staff costs, which include salaries, wages, benefits and sales commissions,
decreased 5% to L12.2 million for the first quarter of 1997 from L12.9 million
for the first quarter of 1996. The decreased staff costs have primarily occurred
due to a reduction in costs relating to sales commission and bonuses in the
first quarter of
9
1997 compared to the first quarter of 1996 following the restructuring of the
sales commission scheme in the second half of 1996. The number of employees
(excluding sub-contractors) was 2,664 full time equivalents at March 31, 1997,
compared with 2,400 at March 31, 1996; the increase in staff numbers have
primarily been in customer service and the non-commission earning sectors of the
business.
Selling, general and administrative expenses increased 23% to L14.5 million
for the first quarter of 1997 from L11.8 million for the first quarter of 1996
primarily as the result of increased advertising and promotion expenses and the
increase in the bad debt charge arising from increased customer numbers.
Operating expenses directly attributable to the design, construction and
installation of the network are capitalized within the network and not charged
to income. These capitalized costs were L11.1 million for the first quarter of
1997 and L10.9 million for the first quarter of 1996.
OTHER INCOME (EXPENSE)
Interest income primarily arises from the investment of proceeds of debt
and equity in advance of capital expenditures and operating cash flow
requirements and from balances due from NYNEX and its affiliates. Interest
income increased to L1.2 million for the first quarter of 1997 from L0.1 million
for the first quarter of 1996.
In the first quarter of 1997, interest expense increased to L9.8 million,
net of L0.7 million which was capitalized. In the first quarter of 1996 interest
expense was L5.4 million, net of L0.5 million which was capitalized. In both the
first quarters of 1997 and 1996, L1.6 million of interest expense was
attributable to the amortization of deferred finance costs. Substantially all of
the balance represents interest paid to the North and South limited partners
under their respective financing arrangements for increased levels of borrowing.
The Minority interest portion of the loss for the first quarter of 1997 was
L12.2 million compared with L15.2 million for the first quarter of 1996. The
decrease is due to smaller operating losses in the period. (See Note E to the
unaudited Combined Financial Statements describing the Minority Interest in
NYNEX CableComms).
INCOME TAXES
Prior to June 14, 1995, NYNEX CableComms' US corporations were included in
the NYNEX consolidated federal income tax return and in New York State and New
York City combined income tax filings. While included in the NYNEX tax filings,
NYNEX CableComms' US corporations were allocated payments in accordance with the
effect their losses had on reducing the consolidated group's taxable income. As
a result of the reorganization which occurred immediately prior to the
completion of the initial public offering of NYNEX CableComms UK and NYNEX
CableComms US on June 14, 1995, NYNEX CableComms and its US corporations do not
qualify to be included in the NYNEX consolidated US federal income tax return or
in any state or local combined tax returns. As a result, for tax periods after
June 14, 1995 equivalent payments have not been made to NYNEX CableComms by
NYNEX for any further losses generated and NYNEX UK Holdings and its US
subsidiaries have been treated as a consolidated group of corporations for US
tax return purposes. However, neither NYNEX CableComms UK nor NYNEX CableComms
US has been consolidated with NYNEX UK Holdings or its subsidiaries for US tax
purposes. As a result, NYNEX CableComms UK and NYNEX CableComms US will file
their own US federal tax returns separately from NYNEX UK Holdings. For the
reasons stated above no tax benefit arose in either the first quarter of 1997 or
1996.
FOREIGN EXCHANGE
All of NYNEX CableComms' revenues are denominated in pounds sterling.
Although the majority of NYNEX CableComms' operating expenses are incurred in
pounds sterling, NYNEX CableComms purchases certain of its network materials,
equipment and the services of seconded NYNEX employees in US dollars. During the
first quarters of 1997 and 1996, NYNEX CableComms did not experience significant
gains or
10
losses as a result of fluctuations in the exchange rate of currencies. To date,
NYNEX CableComms has not used foreign currency hedging instruments to reduce its
exposure to foreign exchange fluctuations.
CAPITAL RESOURCES AND LIQUIDITY
Significant additional capital expenditures are required to construct the
remaining portions of NYNEX CableComms' network. Under the terms of current
licenses, NYNEX CableComms is required to construct cable television systems
passing an additional 0.7 million premises by the end of 2000, in accordance
with a series of prescribed intermediate milestones for each of its franchises.
NYNEX CableComms expects to have significant capital requirements for the
foreseeable future, expecting to make capital expenditures of approximately
L300.0 million for each of three years from January 1, 1997. During the first
quarter of 1997 capital expenditures were L65.2 million, compared to L88.4
million in the first quarter of 1996; the decrease in capital expenditures in
the first quarter of 1997 was primarily the result of slowing down the level of
the network build in the period.
FINANCING OF NYNEX CABLECOMMS
At March 31, 1997, NYNEX CableComms had available L323.8 million of undrawn
debt facilities, available subject to NYNEX CableComms passing a certain number
of homes.
The financing of NYNEX CableComms is described in Notes D, E and H to the
unaudited Combined Financial Statements. The North limited partner had
contributed L131.3 million to the North Partnership at March 31, 1997 and 1996
and had provided a further L324.1 million and L163.5 million in financing to the
Northern Operating Companies under the North Credit Facility at March 31, 1997
and 1996, respectively. The South limited partner had contributed L80.4 million
to the South Partnership at March 31, 1997 and 1996 and had provided a further
L168.6 million and L51.9 million in financing to the Southern Operating
Companies under the South Credit Facility at March 31, 1997 and 1996,
respectively.
CASH FLOWS AND LIQUIDITY
NYNEX CableComms had net cash provided by/(used in) operating activities of
L12.8 million and L(3.8) million for the first quarters of 1997 and 1996,
respectively. The movement is primarily due to a reduction in operating losses
before interest, tax, depreciation and amortization in the first quarter of 1997
compared to the first quarter of 1996.
Net cash used in investing activities was L64.7 million and L88.4 million
for the first quarter of 1997 and 1996, respectively. These included
expenditures on constructing the network and associated capital expenditures of
L65.2 million for the first quarter of 1997 and L88.4 million for the first
quarter of 1996.
Net cash provided by financing activities was L43.5 million and L90.0
million for the first quarter of 1997 and 1996, respectively. During the first
quarter of 1997 and 1996, the Northern Operating Companies and Southern
Operating Companies borrowed L45.0 million and L90.0 million respectively, under
the credit facilities which are detailed in Note D to the unaudited Combined
Financial Statements.
OTHER MATTERS
REGULATORY ISSUES
(I) BT NETWORK PRICE CAP
Oftel continues to consult on the framework for the pricing of BT
interconnection services. NYNEX CableComms must purchase interconnection
services from BT in order to complete calls to BT customers. Oftel has proposed
that BT's interconnection products will be divided into non-competitive,
prospectively competitive and competitive services. Non-competitive services
would be subject to price cap where price increases would be limited to the
Retail Price Index ("RPI") less a certain percentage (to be determined by
Oftel), for prospectively competitive services the limit on price increases
would be set at RPI. BT would be
11
free to set the price for competitive services. The regime will also require
prices to be set based on long run incremental costs, rather than fully
allocated historic costs as is currently the case.
The regime will commence on October 1, 1997 for a period of four years. A
further consultation document is expected from Oftel in May 1997.
(II) INTEROPERABILITY
In April 1997 Oftel published a Statement on interoperability of services
across networks. The proposals aim to ensure that new services will work across
the many networks being deployed in the UK and between those networks and the
customer equipment used to access them.
Consultation will take place on the proposals until July 16, 1997.
RECENT DEVELOPMENTS
On April 28, 1997, CWC announced that all conditions had been satisfied or
waived in connection with its recommended offers (the "Offers") to purchase all
the Ordinary Shares of NYNEX CableComms UK and all the shares of Common Stock of
NYNEX CableComms US comprised in Units and that the Initial Offer Period, as
extended, and withdrawal rights, expired at 2:30 pm (London time), 9:30 am (New
york City time) on April 28, 1997. Pursuant to the Offers, CWC has accepted for
purchase all Units and NYNEX CableComms ADSs validly tendered and not withdrawn
prior to the expiration of the Initial Offer Period in exchange for 0.330714
Ordinary Shares of CWC per NYNEX CableComms UK Ordinary Share and 0.036746 CWC
Ordinary Shares per NYNEX CableComms US share of Common Stock (equivalent to
0.36746 CWC Ordinary Shares per Unit and 3.6746 CWC Ordinary Shares per NYNEX
CableComms ADS). The Offers will remain open for a Subsequent Offer Period which
will expire at 2:30 pm (London time), 9:30 am (New York City time) on May 12,
1997. During the Subsequent Offer Period, Units and NYNEX CableComms ADSs for
which valid acceptances are received will be accepted for purchase by CWC.
The shares purchased by CWC upon the expiration of the Initial Offer Period
included 620,000,000 NYNEX CableComms UK Ordinary Shares and 620,000,000 NYNEX
CableComms US shares of Common Stock tendered by NYNEX through its subsidiary,
NYNEX Network Systems Company, representing approximately 67% of the outstanding
NYNEX CableComms UK Ordinary Shares and 67% of the outstanding NYNEX CableComms
US shares of Common Stock, respectively. As a result, CWC acquired control of
the Companies from NYNEX. In connection with the Offers, the four Directors
appointed by NYNEX to each of the Boards of Directors of NYNEX CableComms UK and
NYNEX CableComms US have resigned effective upon all conditions to the Offers
being satisfied or waived.
Pursuant to an Agreement and Plan of Merger, dated as of March 21, 1997
(the "Merger Agreement"), among NYNEX CableComms US, CWC and Cable & Wireless
Communications Delaware Inc. (the "Merger Sub"), CWC intends to cause Merger Sub
to merge with and into NYNEX CableComms US (the "Merger"). After the effective
time of the Merger, each share of NYNEX CableComms US Common Stock (other than
shares owned by CWC, shares owned by NYNEX CableComms US as treasury shares or
by any of its subsidiaries) will be converted into the right to receive 0.036746
CWC Ordinary Shares (or at the election of the shareholder, 0.007349 CWC
American Depositary Shares). As a result of the Merger, the separate corporate
existence of NYNEX CableComms US will cease and NYNEX CableComms US will become
a wholly-owned subsidiary of CWC. At a Special Meeting of NYNEX CableComms US
held on April 24, 1997, the shareholders of NYNEX CableComms US approved the
Merger.
12
Pursuant to Sections 428-430F of the Companies Act 1985 of Great Britain,
CWC has given a notice on May 6, 1997 that it will acquire compulsorily the
remaining NYNEX CableComms UK Ordinary Shares (including those represented by
NYNEX CableComms ADSs) not purchased by CWC in the Offers (the "Compulsory
Acquisition") on the same terms as in the Offers. As a result of the Compulsory
Acquisition, NYNEX CableComms UK will become a wholly-owned subsidiary of CWC
and all of the outstanding NYNEX CableComms UK Ordinary Shares, other than NYNEX
CableComms UK Ordinary Shares held by CWC, will be acquired for 0.330714 CWC
Ordinary Shares per NYNEX CableComms UK Ordinary Share (or, at the election of
the shareholder, 0.066143 CWC American Depositary Shares).
13
NYNEX CABLECOMMS GROUP PLC AND
NYNEX CABLECOMMS GROUP INC.
OPERATING STATISTICS -- FIRST QUARTER 1997
(UNAUDITED)
The following table summarizes information set out in Management's
Discussion and Analysis of Financial Condition and Results of Operations:
NET ADDITIONS
---------------------------
3 MONTHS TO 3 MONTHS TO
MARCH 31, MARCH 31,
1997 1996
----------- -----------
CABLE TELEVISION
Homes released to operations....................................... 78,072 N/A
Cable television customers......................................... 15,201 14,607
RESIDENTIAL TELECOMMUNICATIONS
Homes released to operations....................................... 78,072 N/A
Residential lines connected........................................ 27,554 35,684
BUSINESS TELECOMMUNICATIONS
Business lines connected........................................... 6,056 3,906
MARCH 31, DECEMBER 31, MARCH 31,
1997 1996 1996
TOTAL TOTAL TOTAL
--------- ------------ ---------
Homes passed........................................ 1,699,941 1,612,261 1,360,238
Businesses passed................................... 88,127 83,875 60,648
--------- --------- ---------
TOTAL PREMISES PASSED............................... 1,788,068 1,696,136 1,420,886
========= ========= =========
CABLE TELEVISION
Homes released to operations........................ 156,934 1,490,862 1,262,237
Basic customers..................................... 283,720 268,519 211,611
Penetration rate (restated)*........................ 18.1% 18.1% 16.8%
Pay to basic ratio.................................. 201.5% 213.5% 202.3%
Churn rate.......................................... 27.2% 29.6% 30.1%
Average monthly revenue per customer................ L23.06 L22.83 L23.44
RESIDENTIAL TELECOMMUNICATIONS
Homes released to operations........................ 1,568,934 1,490,867 1,262,237
Residential lines connected......................... 376,814 349,260 268,235
Penetration rate (restated)*........................ 24.0% 23.4% 21.3%
Churn rate.......................................... 16.3% 16.4% 17.8%
Average monthly revenue per line.................... L19.55 L19.96 L19.70
BUSINESS TELECOMMUNICATIONS
Businesses released to operations................... 83,340 78,160 n/a
Business lines connected............................ 39,343 33,287 18,166
Average number of lines per customer................ 4.7 4.4 3.5
Churn rate.......................................... 12.6% 13.0% 12.4%
Average monthly revenue per line.................... L42.58 L49.39 L48.25
- ---------------
* NYNEX CableComms has changed the method of calculating penetration rates using
homes released to operations as the denominator in the calculations rather
than homes passed and marketed. The comparative figures for March 31, 1996 and
December 31, 1996 have been restated using the new method of calculation.
n/a -- not available
14
NYNEX CABLECOMMS GROUP PLC AND
NYNEX CABLECOMMS GROUP INC.
PART II -- OTHER INFORMATION
ITEM 5 OTHER INFORMATION
None
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
EXHIBIT
NUMBER
------
(10a) Agreement dated as of April 25, 1997 between NYNEX CableComms Oldham and
Tameside and CWC with respect to loans by CWC to NYNEX CableComms Oldham and
Tameside in the aggregate principal amount of L34,400,000
(10b) Schedule identifying substantially identical agreements to the Agreement
constituting Exhibit 10a hereto entered into by CWC with each of the following
subsidiaries of Registrants:
NYNEX CableComms Bolton
NYNEX CableComms Blackburn
NYNEX CableComms Bury and Rochdale
NYNEX CableComms Cheshire
NYNEX CableComms Derby
NYNEX CableComms Greater Manchester
NYNEX CableComms Macclesfield
NYNEX CableComms Staffordshire
NYNEX CableComms Stockport
NYNEX CableComms Wirral
NYNEX CableComms Bromley
NYNEX CableComms Solent
NYNEX CableComms Surrey
NYNEX CableComms Sussex
NYNEX CableComms Wessex
(27) Financial Data Schedule
(B) REPORTS ON FORM 8-K
The Companies filed a Current Report on Form 8-K, dated April 2, 1997, in
respect of the Merger Agreement dated as of March 21, 1997 among NYNEX
CableComms US, CWC and Cable & Wireless Communications Delaware Inc. (Item
5).
The Companies filed a Current Report on Form 8-K, dated April 23, 1997, in
respect of the Companies' press release dated April 23, 1997 announcing the
Companies total revenue for the three-month period ended March 31, 1997
(Items 5 and 7).
The Companies filed a Current Report on Form 8-K, dated April 24, 1997, in
respect of the Companies' press release dated April 24, 1997 announcing the
results of votes taken at the Extraordinary General Meeting and the Special
Meeting of Shareholders held on April 24, 1997 (Items 5 and 7).
15
The Companies filed a Current Report on Form 8-K, dated April 28, 1997,
reporting the change in control of the Companies as a result of the
acquisition of shares in the Companies by CWC on April 28, 1997 (Items 1
and 7).
16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrants have duly caused this report to be signed on their behalf by the
undersigned officers thereunto duly authorized.
NYNEX CABLECOMMS GROUP PLC
(Registrant)
/s/ GRAHAM L. ROBERTSON
------------------------------------
Graham L. Robertson
Principal Financial Officer
Date: May 7, 1997
NYNEX CABLECOMMS GROUP INC.
(Registrant)
/s/ GRAHAM L. ROBERTSON
------------------------------------
Graham L. Robertson
Principal Financial Officer
Date: May 7, 1997
17
EXHIBIT INDEX
SEQUENTIALLY
EXHIBIT NUMBERED PAGE
------ -------------
(10a) Agreement dated as of April 25, 1997 between NYNEX CableComms
Oldham and Tameside and CWC with respect to loans by CWC to
NYNEX CableComms Oldham and Tameside in the aggregate principal
amount of L34,400,000
(10b) Schedule identifying substantially identical agreements to the
Agreement constituting Exhibit 10a hereto entered into by CWC
with each of the following subsidiaries of Registrants:
NYNEX CableComms Bolton
NYNEX CableComms Blackburn
NYNEX CableComms Bury and Rochdale
NYNEX CableComms Cheshire
NYNEX CableComms Derby
NYNEX CableComms Greater Manchester
NYNEX CableComms Macclesfield
NYNEX CableComms Staffordshire
NYNEX CableComms Stockport
NYNEX CableComms Wirral
NYNEX CableComms Bromley
NYNEX CableComms Solent
NYNEX CableComms Surrey
NYNEX CableComms Sussex
NYNEX CableComms Wessex
18
EXHIBIT 10B
Schedule identifying substantially identical agreements, between Cable &
Wireless Communications plc and each of the following subsidiaries of NYNEX
CableComms Group PLC and NYNEX CableComms Group Inc. (the "Companies") providing
for loans by Cable & Wireless Communications plc to each of the following
subsidiaries, to the Agreement constituting Exhibit 10a to the Quarterly Report
on Form 10-Q of the Companies for the quarter ended March 31,1997:
SUBSIDIARY LOAN AMOUNT
- ------------------------------------------------------------------------------- -----------
NYNEX CableComs Bolton L35,100,000
NYNEX CableComs Blackburn L42,600,000
NYNEX CableComs Bury and Rochdale L19,000,000
NYNEX CableComs Cheshire L35,500,000
NYNEX CableComs Derby L25,800,000
NYNEX CableComs Greater Manchester L70,900,000
NYNEX CableComs Macclesfield L14,000,000
NYNEX CableComs Staffordshire L35,600,000
NYNEX CableComs Stockport L28,000,000
NYNEX CableComs Wirral L31,300,000
NYNEX CableComs Bromley L12,800,000
NYNEX CableComs Solent L32,000,000
NYNEX CableComs Surrey L47,300,000
NYNEX CableComs Sussex L30,600,000
NYNEX CableComs Wessex L55,100,000
EXHIBIT 10A
DATED 25TH APRIL, 1997
CREDIT AGREEMENT
BETWEEN
NYNEX CABLECOMMS OLDHAM AND TAMESIDE
as Borrower
and
CABLE & WIRELESS COMMUNICATIONS PLC
as Lender
ALLEN & OVERY
London
INDEX
CLAUSE PAGE
1. Interpretation.............................. 1
2. The Facility................................ 3
3. Purpose..................................... 3
4. Conditions Precedent........................ 3
5. Utilisation of the Facility................. 3
6. Interest on Advances........................ 4
7. Interest Periods............................ 4
8. Repayment................................... 4
9. Prepayment.................................. 4
10. Taxes....................................... 4
11. Mitigation.................................. 5
12. Representations............................. 5
13. Events of Default........................... 6
14. Default Interest............................ 6
15. Payments.................................... 7
16. Costs and Expenses.......................... 7
17. Assignments and Transfers................... 8
18. Calculations................................ 8
19. Remedies, Waivers and Amendments............ 8
20. Partial Invalidity.......................... 8
21. Increased Costs............................. 8
22. Notices..................................... 9
23. Counterparts................................ 9
24. Law......................................... 9
SCHEDULES
1. Condition Precedent Documents............... 11
2. Notice of Drawdown.......................... 12
SIGNATORIES........................................... 13
THIS AGREEMENT is made the 25th day of April, 1997 BETWEEN:
(1) NYNEX CABLECOMMS OLDHAM AND TAMESIDE (the "BORROWER"); and
(2) CABLE & WIRELESS COMMUNICATIONS PLC (the "LENDER").
NOW IT IS HEREBY AGREED as follows:
1. INTERPRETATION
1.1. In this Agreement:
"ADVANCE" means an Advance made or to be made by the Lender under this
Agreement or, as the case may be, the outstanding principal amount of
such advance.
"AVAILABLE FACILITY" means at any time the Facility Amount at such time
adjusted, in the case of a proposed Drawdown only, so as to:
(a) be decreased by the amount of any Advances which, pursuant to
any other Drawdown, the Lender is then obliged to make on or before
the proposed Drawdown Date relating to such proposed Drawdown; and
(b) be increased by the amount of any Advances which were made by
the Lender pursuant hereto and which are due to be prepaid on or
before the proposed Drawdown Date relating to such Drawdown.
"COMMITMENT TERMINATION DATE" means 25th March, 1998.
"CWC FACILITY AGREEMENT" means the facility agreement dated 19th March,
1997 between the Lender and the financial institutions named therein.
"DRAWDOWN" means a drawdown under this Agreement.
"DRAWDOWN DATE" means the date of a Drawdown, being the date on which an
Advance in respect thereof is to be made.
"EVENT OF DEFAULT" means any of those events specified in Clause 13.
"FACILITY AMOUNT" has the meaning given to it in Clause 2.
"GROUP" means the Borrower and its subsidiaries.
"INTEREST PERIOD" means, save as otherwise provided herein, any of those
periods mentioned in Clause 7.
"INTEREST RATE" means, in relation to any Advance, the amount determined
by the Lender to be the interest rate then applying to advances under the
CWC Facility Agreement.
"LOAN" means the aggregate principal amount for the time being
outstanding hereunder.
"NOTICE OF DRAWDOWN" means a notice substantially in the form set out in
Schedule 2.
"REPAYMENT DATE" means 25th March, 1998.
"REQUESTED AMOUNT" means, in relation to any Notice of Drawdown, the
amount of the Advance therein requested.
"ROLLOVER DATES" means each of 30th June, 30th September and 31st
December falling after the first Drawdown Date provided that where such
date would not be a business day the relevant Rollover Date shall be the
business day immediately preceding such date.
1.2 Any reference in this Agreement to:
a "BUSINESS DAY" shall be construed as a reference to a day (other than a
Saturday or Sunday) on which banks are generally open for business in
London;
a "CLAUSE" shall, subject to any contrary indication, be construed as a
reference to a clause hereof;
a "MONTH" is a reference to a period starting on one day in a calendar
month and ending on the numerically corresponding day in the next
succeeding calendar month save that, where any such period would
otherwise end on a day which is not a business day, it shall end on the
next succeeding business day, unless that day falls in the calendar month
succeeding that in which it would otherwise have ended, in which case it
shall end on the immediately preceding business day PROVIDED THAT, if a
period starts on the last business day in a calendar month or if there is
no numerically corresponding day in the month in which that period ends,
that period shall end on the last business day in that later month (and
references to "MONTHS" shall be construed accordingly);
a "PERSON" shall be construed as a reference to any person, firm,
company, corporation, government, state or agency of a state or any
association or partnership (whether or not having separate legal
personality) of two or more of the foregoing;
a "SCHEDULE" shall, subject to any contrary indication, be construed as a
reference to a schedule hereto;
"TAX" shall be construed so as to include any tax, levy, impost, duty or
other charge of a similar nature;
"VAT" shall be construed as a reference to value added tax including any
similar tax which may be imposed in place thereof from time to time; and
the "WINDING-UP", "DISSOLUTION" or "ADMINISTRATION" of a company or
corporation shall be construed so as to include any equivalent or
analogous proceedings under the law of the jurisdiction in which such
company or corporation is incorporated or any jurisdiction in which such
company or corporation carries on business including the seeking of
liquidation, winding-up, reorganisation, dissolution, administration,
arrangement, adjustment, protection or relief of debtors.
1.3 "L." and "STERLING" denote lawful currency of Great Britain and Northern
Ireland.
1.4 Save where the contrary is indicated, any reference in this Agreement to:
(a) this Agreement or any other agreement or document shall be
construed as a reference to this Agreement or, as the case may be,
such other agreement or document as the same may have been, or from
time to time be, amended, varied, novated or supplemented;
(b) a statute shall be construed as a reference to such statute
as the same may have been, or may from time to time be, amended or
re-enacted; and
(c) a time of day shall be construed as a reference to London
time.
1.5 Clause and Schedule headings are for ease of reference only.
2. THE FACILITY
The Lender grants to the Borrower, upon the terms and subject to the
conditions hereof a sterling credit facility in an amount not to exceed,
at any time, L.34,400,000 or such higher amount designated in writing by
the Lender to the Borrower (the "FACILITY AMOUNT").
3. PURPOSE
The facility is intended to be used to fund the capital expenditure and
general working capital requirements of the Borrower and to refinance
existing indebtedness of the Borrower and, accordingly, the Borrower
shall apply all amounts raised by it hereunder in making such payments.
4. CONDITIONS PRECEDENT
The Borrower may not deliver any Notice of Drawdown hereunder unless the
Lender has confirmed to the Borrower that all documents listed in
Schedule 1 have been received and that each is, in form of substance,
satisfactory to the Lender.
5. UTILISATION OF THE FACILITY
5.1 Save as otherwise provided herein, an Advance will be made by the Lender
to the Borrower if:
(a) not more than 10 nor less than one business day before the
proposed date for the making of such Advance, the Lender has
received from the Borrower a Notice of Drawdown therefor (or such
other notice acceptable to the Lender), receipt of which shall
oblige the Borrower to borrow the amount therein requested on the
date therein stated upon the terms and subject to the conditions
contained herein;
(b) the proposed date for the making of such Advance is a
business day falling before the Commitment Termination Date;
(c) the Requested Amount complies with the conditions set out in
Condition 5.2;
(d) (i) no Event of Default has occurred and is continuing; and
(ii) the representations set out in Clause 12 are true
in all material respects on and as of the proposed date for
the making of such Advance.
5.2 The Requested Amount to be specified in a Notice of Drawdown delivered
pursuant to Clause 5.1 shall be in an amount of up to but not exceeding
the Available Facility in relation to such Drawdown and if less shall be
in a minimum amount of L.100,000.
6. INTEREST ON ADVANCES
6.1 On the last day of the Interest Period relating to each Advance the
Borrower shall, subject to Clause 6.2, pay accrued interest on the Advance
(the "ACCRUED INTEREST") at a rate equal to the Interest Rate (or,
provided no Event of Default has occurred and is continuing, such lesser
rate as the Lender may, in its absolute discretion, specify from time to
time).
6.2 The Borrower may, with the Lender's consent elect by notice in writing to
defer payment of all or part of the Accrued Interest in respect of an
Advance. Any Accrued Interest so deferred will itself bear interest as if
it were a separate Advance. Any Accrued Interest not so deferred shall be
paid in accordance with Clause 6.1. The Borrower may not defer the
payment of Accrued Interest beyond the Repayment Date.
7. INTEREST PERIODS
7.1 Interest shall be calculated on each Advance in respect of the period
from the date of the relevant Drawdown to the Repayment Date by reference
to successive Interest Periods. Each Interest Period shall begin on one
Rollover Date (or, in the case of the first Interest Period, the date of
the first Drawdown) and end on the next and shall apply to all Advances
made or outstanding on the first day of that Interest Period, except that
the first Interest Period relating to any Advance which is not made on a
Rollover Date shall begin on the Drawdown Date of that Advance and end on
the next Rollover Date.
7.2 Any Interest Period which would otherwise extend beyond the Repayment
Date shall be of such duration that it shall end on the Repayment Date.
8. REPAYMENT
The Borrower shall repay all the Advances and all other sums outstanding
under this Agreement on the Repayment Date.
9. PREPAYMENT
The Borrower may at any time by giving to the Lender not less than five
days' prior notice to that effect, prepay the whole or part (being an
amount or integral multiple of L.500,000) of an Advance or Accrued
Interest, the payment of which has been deferred pursuant to Clause 6.2.
Any amount of an Advance prepaid may, subject to the terms and conditions
of this Agreement, be redrawn.
10. TAXES
All payments to be made by the Borrower to the Lender hereunder shall be
made free and clear of and without deduction for or on account of tax
unless the Borrower is required to make such a payment subject to the
deduction or withholding of tax, in which case the sum payable by the
Borrower in respect of which such deduction or withholding is required to
be made shall be increased to the extent necessary to ensure that, after
the making of the required deduction or withholding, the Lender receives
and retains (free from any liability in respect of any such deduction or
withholding) a net sum equal to the sum which it would have received and
so retained had no such deduction or withholding been made or required to
be made.
11. MITIGATION
If circumstances arise which would, or would upon the giving of notice,
result in an increase in the amount of any payment to be made to the
Lender or for its account pursuant to Clause 10 then, without in any way
limiting, reducing or otherwise qualifying the rights of the Lender or
the obligations of the Borrower under Clause 10 the Lender shall promptly
upon becoming aware of the same (and to the extent that it can do so
without prejudice to its own position) take reasonable steps to mitigate
the effects of such circumstances.
12. REPRESENTATIONS
12.1 The Borrower represents that:
(a) It is a company duly organised under the laws of England and
Wales with power to enter into this Agreement and to exercise its
rights and perform its obligations hereunder and all corporate and
other action required to authorise its execution of this Agreement
to which it is a party and its performance of its obligations
hereunder has been duly taken;
(b) all acts, conditions and things required to be done,
fulfilled and performed in order:
(i) to enable it lawfully to enter into, exercise its
rights under and perform and comply with the obligations
expressed to be assumed by it in this Agreement;
(ii) to ensure that the obligations expressed to be
assumed by it in this Agreement are legal, valid and binding;
and
(iii) to make this Agreement admissible in evidence in
England and Wales have been done, fulfilled and performed;
(c) under the laws of England and Wales in force at the date
hereof, it is not necessary that this Agreement be filed, recorded
or enrolled with any court or other authority in England and Wales
or that any stamp, registration or similar tax be paid on or in
relation to this Agreement; and
(d) the obligations expressed to be assumed by it in this
Agreement are legal and valid obligations binding on it in
accordance with the terms thereof.
12.2 The representations contained in Clause 12.1 shall be deemed to be
repeated on each date on which an Advance is made hereunder by reference
to the facts and circumstances then existing.
13. EVENTS OF DEFAULT
If:
(a) the Borrower fails to pay within five business days any sum
due from it under this Agreement at the time, in the currency and in
the manner specified herein; or
(b) any representation or statement made by the Borrower is or
proves to have been incorrect or misleading in any material respect
when made,
(c) an encumbrancer takes possession of, or a trustee or
administrative or other receiver or similar officer is appointed in
respect of, all or any part of the business or assets of the
Borrower, or distress or any form of execution is levied or enforced
upon or sued out against any such assets and is not discharged
within fourteen (14) days of being levied, enforced or sued out, or
any Security Interest which may for the time being affect any of its
assets is enforced and the amount claimed is in excess of
L.5,000,000;
(d) the Borrower is unable to pay its debts within the meaning of
Section 123 of the Insolvency Act 1986 or becomes unable to pay its
debts as they fall due or suspends or threatens to suspend making
payments (whether of principal or interest) with respect to all or
any class of its debts;
(e) the Borrower convenes a meeting of its creditors generally by
reason of financial difficulties or proposes or makes any
arrangement or composition with, or any assignment for the benefit
of, its creditors;
(f) a petition is presented (other than any petition which is
frivolous or vexatious) or a meeting is convened for the purpose of
considering a resolution or other steps are taken for making an
administration order against or for the winding up of the Borrower
or an administration order or a winding up order is made against the
Borrower;
(g) anything analogous to any of the events specified in
paragraphs (c), (d), (e) or (f) occurs under the laws of any
applicable jurisdiction; or
(h) any of the events mentioned in Clause 14.1 of the CWC
Facility Agreement occurs.
then, and in any such case and at any time thereafter, the Lender may by
written notice to the Borrower declare the Advances to be immediately
due and payable (whereupon the same shall become so payable together
with accrued interest thereon and any other sums then owed by the
Borrower hereunder) and the Lender shall be under no further obligation
to make any Advance hereunder.
14. DEFAULT INTEREST
14.1 If any sum due and payable by the Borrower hereunder is not paid on the
due date therefor in accordance with the provisions of Clause 15 or if any
sum due and payable by the Borrower under any judgment of any court in
connection herewith is not paid on the date of such judgment, the period
beginning on such due date or, as the case may be, the date of such
judgment and ending on the date upon which the obligation of the Borrower
to pay such sum (the balance thereof for the time being unpaid being
herein referred to as an "UNPAID SUM") is
discharged shall be divided into successive periods, each of which (other
than the first) shall start on the last day of the preceding such period
and the duration of each of which shall be selected by the Lender.
14.2 During each such period relating thereto as is mentioned in Clause 14.1
an unpaid sum shall bear interest at the rate of interest specified in
Clause 6.1 plus one per cent. per annum.
14.3 Any interest which shall have accrued under Clause 14.1 in respect of an
unpaid sum shall be due and payable and shall be paid by the Borrower at
the end of the period by reference to which it is calculated or on such
other date or dates as the Lender may specify by written notice to the
Borrower.
15. PAYMENTS
15.1 On each date on which this Agreement requires an amount to be paid by the
Borrower or the Lender hereunder, the Borrower or, as the case may be, the
Lender shall make the same available to the Lender, or as the case may be,
the Borrower by payment in sterling and in same day funds (or in such
other funds as may for the time being be customary in London for the
settlement in London of international banking transactions in sterling) to
the accounts nominated by the Lender or, as the case may be, the account
nominated by the Borrower (or such other account or bank as the Lender
or, as the case may be, the Borrower may have specified for this purpose).
15.2 All payments required to be made by the Borrower hereunder shall be
calculated without reference to any set-off or counterclaim and shall be
made free and clear of and without any deduction for or on account of any
set-off or counterclaim.
16. COSTS AND EXPENSES
16.1 The Borrower shall on demand of the Lender, reimburse the Lender for all
costs and expenses (including reasonable legal fees) together with any VAT
thereon incurred by it in connection with the negotiation, preparation and
execution of this Agreement and any amendments thereto and the completion
of the transactions therein contemplated.
16.2 The Borrower shall, from time to time on demand of the Lender, reimburse
the Lender for all costs and expenses (including reasonable legal fees)
together with any VAT thereon incurred in or in connection with the
preservation and/or enforcement of any of the rights of the Lender under
this Agreement.
16.3 The Borrower shall pay all stamp, registration and other taxes to which
the Lender or any judgment given in connection therewith is or at any time
may be subject and shall, from time to time on demand of the Lender,
indemnify the Lender against any liabilities, costs, claims and expenses
resulting from any failure to pay or any delay in paying any such tax.
16.4 The Borrower shall fully indemnify the Lender from and against any
expense, loss, damage or liability which it may incur as a consequence of
the occurrence of any Event of Default or of any prepayment under this
Agreement or otherwise in connection with this Agreement. Without
prejudice to its generality, the foregoing indemnity shall extend to any
interest, fees or other sums whatsoever paid or payable on account of any
funds borrowed in order to carry any unpaid amount and to any loss
(excluding loss of profit), premium or expense which may be
incurred in liquidating or employing deposits from third parties acquired
to make, maintain or fund the outstanding Advances (or any part of them)
or any other amount due or to become due under this Agreement.
17. ASSIGNMENTS AND TRANSFERS
The Borrower shall not be entitled to assign or transfer all or any of
its rights, benefits and obligations hereunder without the consent in
writing of the Lender. The Lender may assign or transfer all or any of
its rights, benefits and obligations hereunder without the consent of the
Borrower.
18. CALCULATIONS
Interest shall accrue from day to day and shall be calculated on the
basis of a year of 365 days and the actual number of days elapsed.
19. REMEDIES, WAIVERS AND AMENDMENTS
19.1 No failure to exercise, nor any delay in exercising, on the part of the
Lender, any right or remedy hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any right or remedy prevent
any further or other exercise thereof or the exercise of any other right
or remedy. The rights and remedies herein provided are cumulative and not
exclusive of any rights or remedies provided by law.
19.2 The Lender and the Borrower may from time to time enter into amendments,
supplements or modifications hereto provided that such amendments,
supplements or modifications are in writing.
20. PARTIAL INVALIDITY
If, at any time, any provision hereof is or becomes illegal, invalid or
unenforceable in any respect under the law of any jurisdiction, neither
the legality, validity or enforceability of the remaining provisions
hereof nor the legality, validity or enforceability of such provision
under the law of any other jurisdiction shall in any way be affected or
impaired thereby.
21. INCREASED COSTS
Where the Lender determines that:
(a) the introduction or variation of any law or any change in the
interpretation or application of any law; or
(b) compliance with any new regulation (whether or not having the
force of law) from any central bank or other fiscal, monetary or
other authority or agency,
would:
(i) increase the cost, whether by sustaining a loss or otherwise,
to it of making or maintaining or funding the Advances; or
(ii) reduce the amount of any sum received or receivable by it in
respect of the Advances; or
(iii) oblige it (or its holding company) to make any payment or
suffer any cost or loss (except in respect of tax on overall net
income) or forego any interest or other return on, or calculated by
reference to, the amount of any sum received or receivable by it
from the Borrower under this Agreement; or
(iv) reduce the effective return to it under this Agreement on its
overall capital as a result of its entry into and/or compliance with
this Agreement,
then:
(a) the Lender shall notify the Borrower of such event promptly
upon its becoming aware of such event;
(b) the Borrower shall on demand pay to the Lender such amounts
as the Lender from time to time and at any time (including after a
prepayment of the Advances) notifies to be necessary to compensate
it for such increased cost, reduction, payment or foregone interest
or return.
21.2 The Borrower shall not be obliged to make a payment to the Lender in
compensation for an increased cost, reduction, payment or foregone
interest or return as referred to in clause 21.1 where such increased
cost, reduction, payment or foregone interest or return is:
(a) one in respect of which the Lender is entitled to be
compensated for under any other provision of this Agreement; or
(b) attributable to any change in the rate of Tax on the overall
net income of the Lender in whatever jurisdiction.
22. NOTICES
22.1 Each communication to be made hereunder shall be made in writing but,
unless otherwise stated, may be made by fax or letter.
22.2 Any communication or document to be made or delivered by one person to
another pursuant to this Agreement shall (unless that other person has by
15 days' written notice to the other specified another address) be made or
delivered to that other person at the address identified with its
signature below and shall be deemed to have been made or delivered when
despatched or transmitted (in the case of any communication made by fax)
or (in the case of any communication made by letter) when left at that
address or (as the case may be) 10 days after being deposited in the post,
postage prepaid in an envelope addressed to it at that address.
23. COUNTERPARTS
This Agreement may be executed in counterparts.
24. LAW
This Agreement shall be governed by, and shall be construed in accordance
with, English law.
This Agreement has been entered into on the date stated at the beginning of
this Agreement.
SCHEDULE 1
CONDITION PRECEDENT DOCUMENTS
A copy, certified a true copy by a duly authorised officer of the Borrower, of
a Board Resolution of the Borrower approving the execution, delivery and
performance of this Agreement and the terms and conditions thereof and
authorising a named person or persons to sign this Agreement and any documents
to be delivered by the Borrower pursuant hereto.
SCHEDULE 2
NOTICE OF DRAWDOWN
From: Nynex CableComms Oldham and Tameside
To: Cable & Wireless Communications Plc
Copy to: HSBC Investment Bank Plc*
Dated:
Dear Sirs
1. We refer to the agreement (as from time to time amended, varied, novated
or supplemented, the "AGREEMENT") dated [ ] and made between
ourselves as Borrower and yourselves as Lender. Terms defined in the
Agreement shall have the same meaning in this notice.
2. We hereby give you notice that, pursuant to the Agreement and upon the
terms and subject to the conditions contained therein, an Advance should
be made to us as follows:
(a) [Requested Amount]:
(b) [Drawdown Date]:
3. We confirm that, at the date hereof, the representations set out in
Clause 12.1 of this Agreement are true in all material respects and no
Event of Default has occurred and is continuing.
4. The proceeds of this drawdown should be credited directly to [Bank]
[insert account details] in repayment of funds outstanding under the [name
of credit agreement].*/The proceeds of this drawdown should be credited to
[insert account details].
Yours faithfully
....................................
for and on behalf of
Nynex CableComms Oldham and Tameside
- -------------
* (only insert where drawdown is to be applied in refinancing existing loan)
SIGNATORIES
THE BORROWER
NYNEX CABLECOMMS OLDHAM AND TAMESIDE
By:
Address:
Fax:
Attention: Treasurer/Company Secretary
THE LENDER
CABLE & WIRELESS COMMUNICATIONS PLC
By:
Address:
Fax:
Attention: Treasurer/Company Secretary